Budget Speech 2016: To junk or not to junk- this is the question

It’s safe to say South Africa’s Finance Ministry will pull all strings and ropes in this year’s budget speech to avoid a downgrade to junk status.

The speech will take place within a catch 22 context as 2016 is an election year, making the most likely targets to generate revenue, the country’s wealthy.

In 2015, three of the country’s main industries (agriculture, mining, water and electricity) shrunk. Agriculture saw the biggest contraction by 12.6%, mining by 9.8% and water, gas and electricity supply by 0.8% in the third quarter. According to stats SA those three industries were regarded as being in recession: “This was the third consecutive quarter of agricultural decline, and the second consecutive quarter of decline for both mining and electricity.”

Of the top ten industries, “The other industries that experienced growth in the third quarter were finance (+2,8%), trade (+2,5%), personal services (+1,7%), government (+1,2%), construction (+0,5%), and transport (+0,1%),” said Stats SA in the third quarter of 2015.

With prolonged drought conditions across the country, falling commodity prices, a weak rand and energy supply constraints, it would seem that the worst is yet to come for South Africa’s battling economy. Newly appointed and former Finance Minister Pravin Gordhan will most likely announce direct personal and corporate tax on income as a key instrument to generate revenue for the country among other tricky tweaks that may or may not assist the economy’s plight.